Inverse Etfs, Graniteshares short

[JustLookingThx]

Anyone with experience know for what time frames (days, months, years?) these instruments are ideally used?

Thanks!

[abe777]

None myself, first time I have seen these tbh & similar to yourself what’s the real world experience? Useful for bears

Search on T212 forum brings up some previous threads -

How do inverse ETFs work?

As far as I know, these inverse ETFs do not roll from one day to the next like a normal stock would. For example, if Index A loses 10% over two months, the inverse of Index A should be up 10%, but it appears from my research into this that it isn’t the case at all.

Shorting and inverse ETFs

I have an ISA account and was wondering what inverse ETFs do most of you use and can recommend for shorting. Especially major indexes I haven’t looked at the CFD account yet, but is there another way of shorting individual stocks there? Thanks

An external view:

What to Know Before Buying Inverse and Short ETFs

[phildawson]

@JustLookingThx meet @Marc45 from GraniteShares to help answer Qs

GraniteShares ETPs – News / Questions & Answers

Dear T212 Traders, Tihomir and I recently joined GraniteShares. Our role on the forum will be to answer all your questions and to make sure that you understand correctly how GraniteShares’ ETPs work. We create this topic to centralize all questions about GraniteShares ETPs in order to help you better understand the mechanics around our investment products. Unlike others investment products, the pricing and execution of orders are not in the same hands. For an ETP, multiple player (the exchang…

[Tihomir]

@JustLookingThx, we will be happy to answer all your questions related to GraniteShares ETPs

[JustLookingThx]

Thank you @Tihomir

I was bold enough (xD) considering shorting Tesla with this instrument:

GraniteShares 3x Short Tesla Daily ETP

My question is straight forward:
What is the recommended time frame holding this ETP? If I assume correctly it is using derivatives. I have been told/read that some inverse ETPs are not suited to be held for prolonged periods of time

[Tihomir]

GraniteShares Leveraged ETP Securities are designed to give investors leveraged long or short exposure to the daily moves of an underlying asset.

Based on that, recommended holding period: One day

If you would like to learn more about GraniteShares investment products, please visit our educational section here: GraniteShares

Any additional questions, please let us know.

[JustLookingThx]

What are the disadvantages of holding lets say for a week if I may ask

[Marc45]

there is no disadvantages of holding for a week, but an addtional risk that you must understand. We are talking about compounding impact risk. I do not want to say disadvantages , because it can be beneficial during one week of market trend.

[Dao]

just in an example then, if it were to trade sideways with virtually no movement for the whole week you hold the position open, what is the rough compound impact we would see to our positions value?

[Marc45]

if there is no movement , you will not be impacted.
The risk come if the market move up 2% the 1st day, then next day move down 2% and 3rd day move up again by 2% etc…
there is few explanation on this page: Compounding Impact

I am working to do an animated video

[Jace_Mindu]

I’ve been using a few inverse ETFs as day trades so can comment on this.

The ETFs have a reset overnight to offset moves after hours, assuming we’re talking about US stocks that carry on trading when the ETF closes. This means that your stocks moves at a 3x, 5x (whichever rate is set) when the market opens and trades. One day would apply fairly for UK companies, but if you’re shorting US companies, you effectively only have that stock represented by the fund for 2 hours, 14:30-16:30.

As much as this sucks, I’ve actually found the biggest moves happen within the first two hours and once the UK market closes, it seems US stocks stabilise a bit, they are less volatile and tend to just trade in whatever direction they were heading.

Where it’s a bit complex is that you can have a bunch of orders come through for the fund in the morning, so the fund can go up or down sharply based on investor sentiment. That’s why you see it moving for reverse-US funds when the market is closed. If the stock went against the fund during the night before, watch out for the stock dropping in the morning as investors want out, and visa-versa.

So when it comes to holding overnight, you are assuming that the sentiment remains the same the following day, so you might be in for a windfall in the morning. I’ve done this a few times and the pay off can be huge, but you need to be very careful with stocks like Tesla, Coinbase, ARKK, as tweets, bitcoin moves, or reports of Cathie Wood buying more crap, can change sentiment very quickly.

Another frustrating issue is how the sell price is set against you. If a stock goes down, this jumps right down to the lowest average figure, instantly, and this price can be a repeat of once far back in the trading cycle. Let’s say, as an example, 15:00, the stock is at it’s lowest for the day at £1.50, £1.48 sell; which is a nice spread, so you buy here. The stock climbs to £2 by 16:00, which you want to sell at, but the sell price is £1.80. What happened to your spread? The account factors in volatility and delays the spread until it’s been at £2 for 30 minutes or something and maybe it will go up to £1.90. But you don’t have that waiting time because it’s UK hours, so you either take the £1.80 or risk it in the last 30 mins of trade. But this is where it really screws you; if that stock drops to say £1.90, even for a moment, the sell price jumps back to the £1.50, why? Because it exaggerates the volatility when the stock dips. This happens a lot and makes trading these funds very difficult to walk away with a profit, as you have to cash out earlier than you want because the risk of even a minor drop can be catastrophic to your gains.

The other option is CFDs but I’ve seen the system do the same thing with this spread pattern and it’s far less forgiving. No thanks.